Get prepared for some more rate action if inflation rises: S Krishna Kumar, Sundaram Mutual

In an interview with ET Now, S Krishna Kumar, Fund Manager-Equity, Sundaram Mutual, shares his views on the RBI’s hawkish stance and banking stocks. Excerpts:

ET Now: What did you make of the RBI’s hawkish stance? Should we be prepared for more rate hikes in the future?

S Krishna Kumar: The RBI governor clearly laid out the year-end targets in terms of CPI numbers, which is below 9%. In case we do see the inflation flaring up, we should be prepared for some more rate action.

ET Now: The banking stocks clearly were leading the charge yesterday. Would be a buyer among banks?

S Krishna Kumar: On the banking side, the current rate action does not alter our view. We are comfortable with the banks’ ability to price themselves and maintain spreads in the business. As you mentioned, the NPLs, the stress level in system continue to be worrying and there is no respite there. So that will be the guiding factor which would influence our stance of the banking space. Right now we are neutral on the overall space, wherein we are underweight on the PSU banks and we are very positive on the private sector banks. So that is an overweight position for us and we continue to like them.

ET Now: What is it that you folks at Sundaram are buying?

S Krishna Kumar: We are incrementally getting more positive on rate sensitives and the cyclicals sectors. The portfolio would adequately get positioned to reflect the revival in the economy, be it the consumer discretionary space or the financials or the other rate sensitive sectors.

Currently, however, we have a fairly balanced portfolio, which is well diversified across sectors. We are a bit underweight on metals - which is a sector that we have not liked too much over the last two years - and on consumers given the stiff valuations therein. Otherwise we have been pretty well diversified.